About this fund

Robeco Euro Sustainable Credits provides a diversified exposure to the Euro investment grade credit market. The selection of the bonds is based on fundamental analysis. The fund applies a screening process to select issuers that contribute to realizing the UN Sustainable Development Goals (SDGs) goals. The methodology used in the screening process assesses the SDG contribution of all companies it invests in to create the fund’s investable universe. The fund excludes companies that contribute negatively to these goals. Engagement, ESG Integration and Robeco's exclusion policy also form part of the investment policy. Following the screening process the fund is actively managed. The fund can take some off-benchmark positioning in emerging markets, covered bonds and a limited exposure to high yield bonds.

The value of the investments may fluctuate. Past performance is no guarantee of future results.Annualized (for periods longer than one year).Cumulized (total amount of return).Performances are gross of fees and based on closing values. In reality, costs (such as management fees and other costs) are charged. These have a negative effect on the returns shown.Performances are net of fees and based on transaction prices.

Fund

Reference index

The value of the investments may fluctuate. Past performance is no guarantee of future results.Annualized (for periods longer than one year).Cumulized (total amount of return).Performances are gross of fees and based on closing values. In reality, costs (such as management fees and other costs) are charged. These have a negative effect on the returns shown.Performances are net of fees and based on transaction prices.

Performance explanation

Based on transaction prices, the fund's return was 0.74%. The portfolio posted a positive return in April which was a bit higher than the return of the index. The average credit spread of the index tightened from 123 basis points to 107 basis points during the month. This means that the excess return of corporate bonds over government debt amounted to 1.04% in April. Underlying government bond yields rose during the month, contributing negatively to the portfolio’s return. The beta of the portfolio was a bit below one during the month. This top-down positioning made a small negative contribution to the performance of the portfolio. Issuer selection contributed positively too. Our short position in the high yield market, via Itraxx Xover and CDX High Yield, contributed positively to the relative performance. These markets underperformed on a risk-adjusted basis. Spanish banks performed very well in April and the largest positive contributors to the performance were Banco Sabadell and Banco Santander. Other positive contributors were ASR and RBS.

Market development

Corporate bond markets performed strongly in April, driven by tightening of credit spreads. The positive sentiment was in line with positive sentiment on equity markets. There were a few catalysts for this continued appetite for risk. Chinese economic data was a bit better than expected, it seems that the stimulus by the Chinese government is starting to work. We did not see much impact yet of these green shoots on German economic data. There also was some optimism around the ongoing trade talks between the US and China. At the same time, US rhetoric with regard to European trade is turning a bit more hostile. The Brexit theme has moved to the background, as the deadline for the actual exit was postponed twice. The risk of a hard Brexit in the near term is now materially lower. UK financials continued to perform well, though financials, including UK financials, underperformed the broader credit market in the second half of the month. First quarter earnings reported so far are not disappointing versus expectations. That said, the trend so far is for lower company earnings versus the first quarter of last year, something that has not happened in the last few years.

Currency policy

Derivative policy

Robeco Euro Sustainable Credits make use of derivatives for hedging purposes as well as for investment purposes. These derivatives are very liquid.

Dividend policy

The fund distributes dividend on a quarterly basis. This fund aims to pay a quarterly dividend of 1.00%. The dividends referred to are target dividends and may be subject to change as a result of market conditions.

ESG Integration policy

The issuers in the investible universe are screened for their contribution to the UN Sustainable Development Goals (SDG). This is done by using RobecoSAM’s proprietary SDG measurement framework. The contribution of a company towards the realization of the SDGs is determined based on three steps; by looking at what a company produces, how a company produces, and correcting for controversies. The fund does not invest in companies that contribute negatively to these goals. Our credit analysts also integrate ESG factors in their analysis of the companies fundamental credit quality to strengthen our ability to better assess the downside risk of our credit investments.

Investment policy

Robeco Euro Sustainable Credits provides a diversified exposure to the Euro investment grade credit market. The selection of the bonds is based on fundamental analysis. The fund applies a screening process to select issuers that contribute to realizing the UN Sustainable Development Goals (SDGs) goals. The methodology used in the screening process assesses the SDG contribution of all companies it invests in to create the fund’s investable universe. The fund excludes companies that contribute negatively to these goals. Engagement, ESG Integration and Robeco's exclusion policy also form part of the investment policy. Following the screening process, the fund is actively managed. The fund can take some off-benchmark positioning in emerging markets, covered bonds and a limited exposure to high yield bonds. Top-down beta positioning is based on the outcome of our credit quarterly outlook meeting, in which the team is discussing the fundamental market outlook, valuation. of bond markets and market technicals. Bottom-up issuer research is executed by our credit analysts, who execute the fundamental analysis. The analyst research reports are being discussed in approx. 500 credit committees per year. The portfolio managers are responsible for the portfolio construction. A proprietary developed risk management approach avoids high risk concentration in the portfolio. As the investment process is well-structured and proven over time, it contributes to repeatable performance delivery.

Expectation of fund manager

Despite weaker-than-expected macro data, risky assets have performed very well since the start of the year. A dovish Fed shift, expectations for a China trade deal and the backdrop of an oversold market late last year all help explain this turnaround.We see the current rally as typical of bear markets. Nearly all bear markets have occasional rallies, and they are often sharp and painful, just like episodes of spread widening. Sentiment in credit bear markets swings much more wildly in both directions. In times such as these, the market will increasingly distinguish between winners and losers. We construct our portfolios cautiously. We are conscious of the fact that it is expensive to be underweight. But rather than succumbing to the temptation to be long for the carry, we prefer to get prepared so we can return quickly after markets have repriced. Companies enjoyed multiple years of expanding margins, but those days are over. Central banks are prepared to take aggressive steps in order to raise inflation and have become more responsive to developments in financial markets. The downside of this policy is that it can lead to bubbles and create bigger problems down the road.

Jan Willem de Moor, Peter Kwaak

Jan Willem de Moor, Peter Kwaak

Mr. de Moor is a Senior Portfolio Manager and a member of the Credit team. Prior to joining Robeco in 2005, Mr. de Moor was employed by SBA Artsenpensioenfondsen as Senior Portfolio Manager Equities for six years. Before that, he worked at SNS Asset Management holding positions of Portfolio Manager Equities (three years) and Research Analyst (two years). Jan Willem de Moor started his career in the Investment Industry in 1994. He holds a Master's degree in Economics from Tilburg University. Peter Kwaak is a Senior Portfolio Manager and a member of the Credit team. Prior to joining Robeco in 2005, Mr. Kwaak was employed by Aegon Asset Management for three years as Credits and High Yield Portfolio Manager and at NIB Capital for two years as Portfolio Manager. Peter Kwaak started his career in the Investment Industry in 1998. Mr. Kwaak is a CFA Charterholder and holds a Master's degree in economics from the Erasmus University Rotterdam. Mr. Kwaak is registered with the Dutch Securities Institute.

Team

The Robeco Euro Sustainable Credits fundis managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit analysts (of which four financials analysts). The portfolio managers are responsible for the construction and management of the credit portfolios, whereas the analysts cover the team’s fundamental research. Our analysts have long term experience in their respective sectors which they cover globally. Each analyst covers both investment grade and high yield, providing them an information advantage and benefiting from inefficiencies that traditionally exist between the two segmented markets. Furthermore, the credit team is supported by dedicated quantitative researchers and fixed income traders. On average, the members of the credit team have an experience in the asset management industry of seventeen years, of which eight years with Robeco.

Cost of this fund

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Fiscal product treatment

The fund is established in Luxembourg and is subject to the Luxembourg tax laws and regulations. The fund is not liable to pay any corporation, income, dividend or capital gains tax in Luxembourg. The fund is subject to an annual subscription tax ('tax d'abonnement') in Luxembourg, which amounts to 0.05% of the net asset value of the fund. This tax is included in the net asset value of the fund. The fund can in principle use the Luxembourg treaty network to partially recover any withholding tax on its income.

Fiscal treatment of investor

Investors outside Luxembourg are subject to their national tax regime applying to foreign investment funds. We advise individual investors to contact their financial or fiscal adviser regarding their specific fiscal situation.

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